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Danier Leather and Le Château, stores that have been fixtures in the Canadian marketplace for decades, are struggling as cheaper, faster fashion brands steam past them and online retailers gobble up market share.

Danier Leather, with 86 stores across Canada, has hired Consensus Advisory Services, a boutique investment banking and financial advisory firm, to help it explore strategic alternatives after posting yet another steep decline in sales in the last quarter.

“Danier is working on its business and operational strategy with a view to improving its results,” said chief executive officer Jeffrey Wortsman, in response to e-mailed questions from the Star.

“As publicly disclosed, Danier regularly monitors its stores and under-performing stores may be closed or relocated as leases expire or otherwise as well as look for opportunities for new stores. One of Danier’s strategies is to optimize its real estate.”

Le Château, meanwhile, has repeatedly gone to founder, director and majority shareholder Herschel Segal’s firm for loans, most recently in June, when it secured $15-million.

The money is being used to renovate stores and bring them in line with the chain’s new, elevated merchandise offering. The problem, says retail expert Randy Harris of Trendex North America, is that Le Château isn’t renovating stores quickly enough.

The retailer ended the year with 219 locations in Canada and one in the U.S.

“As of the end of August, 2015, the company will have renovated 20 of its stores since the fall of 2011,” Harris wrote in the May edition of industry newsletter Canadian Apparel Insights.

“Note that that is less than 10 per cent of Le Château’s total locations . . . This fact translates to a disconnect between Le Château’s more upscale/expensive merchandise and the environment of its stores. Not a good situation to be in for a retailer,” according to Harris.

The chain has closed 15 stores in Canada in the past three fiscal years, according to information in company earnings and annual reports.

Rough year for Canadian retail

Executives at the Montreal-based Le Château did not respond to requests for comment from the Star.

“The middle fashion market is starting very much to get squeezed,” said Ed Strapagiel, independent retail consultant. “The Zaras and H&Ms of the world have expanded more. It wasn’t a big deal when they only had two stores, but they’ve grown now.”

H&M has 74 locations across Canada and four more will open before the end of 2015. The H&M group will also launch two COS locations in 2015, one in Montreal and one in Toronto. H&M opened its first store in Canada 11 years ago.

Inditex has 26 Zara stores across Canada and five higher-end Massimo Dutti stores, covering the low and higher ends of the apparel market.

Le Château boasts that it offers up-to-the-minute fashion, but Zara and H&M are able to get new fashions — and repeat orders on styles that are selling well — into stores faster than the competition because of their robust supply chains.

“They can move things in fewer steps and a lot faster,” said Strapagiel. “The old-school fashion retailers are like slow fashion now.”

And then there is Amazon. According to equity researchers Cowen and Company, Amazon will replace Macy’s as the leading apparel retailer in the U.S. by 2017.

Amazon would not release figures for the Canadian market, but a spokesperson said customer feedback on the launch of clothing and shoes in June was positive, and Amazon has already expanded the number of items and brands available for purchase.

Adding to this is the fact that one of fashion’s most important demographics, the millennials, are saddled with student loan debt and high housing costs, whether they are renting or trying to buy.

“They have to be very budget conscious,” said John C. Williams, partner at the global retail consultancy J.C. Williams Group.

Danier Leather and Consensus have entered into confidentiality agreements with a number of parties in relation to a variety of possible strategic alternatives, but no definitive agreement has been announced, according to the most recent earnings report.

NPD retail analyst Sandy Silva says the market for leather outerwear in Canada contracted by four per cent in the 12 months ending in May. While there has been a notable surge in innovation when it comes to technical fabrics for outerwear, the same is not true of innovations in leather outwear, Silva said.

Danier is also up against specialty stores such as Rudsak and general retailers such as Hudson’s Bay and Winners, which also sell leather goods, Silva points out.

Danier is hoping to improve profits with a company-wide cost reduction initiative, with targeted annualized savings of up to $7 million.

It has expanded the core leather business to include more down, wool, shearling and cashmere alternatives.

Wortsman believes Danier Leather still has a lot to offer Canadian consumers.

“We want to compete with more expensive brands on quality and styling while offering better pricing resulting from our vertical integration,” he said.

“We believe, and our history shows, that it is not about the lowest price. There are some customers who want the lowest price regardless of quality, but that is not the core Danier customer.”

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